JORC Code

The JORC Code (full name: the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves) is the rulebook that mining and exploration companies must follow when reporting their findings to the public. It is a mandatory framework for companies listed on the ASX (Australian Securities Exchange) and is also highly regarded and used globally. Think of it as a truth serum for the mining industry. Before the code was established by the Joint Ore Reserves Committee, companies could use colorful language to announce discoveries, leaving investors to guess the real value. The JORC Code replaces this hype with a system of strict, clear classifications for mineral deposits. These classifications are based on increasing levels of geological confidence and economic viability, ensuring that when a company reports its assets, investors can compare them on an apples-to-apples basis and make decisions based on credible, audited information.

For a value investor, who prioritizes capital preservation and seeks to understand the true underlying worth of a business, the JORC Code is a powerful ally. The biggest risk in a mining venture is often geological: are the valuable minerals actually in the ground in the quantities claimed, and can they be extracted for a profit? The JORC Code directly tackles this uncertainty. It forces companies to show their work, with all public reports on mineralisation being signed off by a qualified professional. This transparency allows you to conduct far more effective Due Diligence. Instead of being swayed by a soaring share price or a slick presentation, you can dig into the company's reports and assess the quality and certainty of its primary assets. A company with a large tonnage of high-grade, economically viable Ore Reserves is fundamentally less risky and holds more tangible value than a company with only a speculative, loosely defined Mineral Resource. The JORC Code provides the essential language for telling the difference.

To use JORC-compliant reports effectively, you need to understand a few key terms. The most critical distinction is between “Resources” and “Reserves.”

A JORC report isn't just written by the marketing department. It must be based on information and supporting documentation compiled by a Competent Person (or 'CP'). This isn't a vague title; a CP is a geologist or mining engineer with at least five years of relevant experience in the style of mineralisation being reported. They are bound by a professional code of ethics and are personally accountable for their work. The CP is the independent expert who verifies the data, ensuring the estimates are a reasonable reflection of the deposit. Their signature is your primary assurance of the report's integrity.

This is the heart of the JORC Code and the most important concept for an investor to grasp. A Resource is an estimate of what's in the ground, while a Reserve is the portion of that resource that is proven to be economically mineable.

A Mineral Resource is a concentration of material in or on the Earth’s crust in such form, grade, and quantity that there are reasonable prospects for eventual economic extraction. They are classified into three categories based on increasing geological confidence:

• Inferred Resource: The lowest level of confidence. The estimate is based on limited information and sampling. It’s an educated guess that a deposit might exist, but it's too speculative to be used in any detailed economic evaluation. Think of this as a blurry photograph of a potential treasure.
• Indicated Resource: A step up in confidence. The quantity, grade, and geology are known well enough to allow for a preliminary mine plan. The photograph is becoming clearer.
• Measured Resource: The highest level of confidence. The deposit has been explored and sampled so thoroughly that its size, shape, and grade are known with a high degree of certainty. The photograph is now in high definition.

Ore Reserves are the real prize. An Ore Reserve is the economically mineable part of an Indicated or Measured Mineral Resource. To convert a Resource into a Reserve, the company must have completed a study (such as a Pre-Feasibility Study or a full Feasibility Study) that demonstrates the project is technically achievable and economically viable. This involves applying “Modifying Factors,” which include:

• Mining and processing methods
• Metallurgical recovery rates
• Marketing and transportation logistics
• Economic factors (commodity prices, costs)
• Environmental and legal permits
• Governmental and social factors

Ore Reserves are also split into two categories:

• Probable Ore Reserve: The economically mineable part of an Indicated Resource. All modifying factors have been considered, and it is a viable project, but the geological confidence is slightly lower than the top tier.
• Proved Ore Reserve: The economically mineable part of a Measured Resource. This is as close to a sure thing as you can get in mining. The geology is well-defined, and the economic viability has been demonstrated to the highest degree of confidence.

The JORC Code is an essential tool for reducing risk when analyzing mining stocks. It standardizes reporting, introduces accountability through the Competent Person, and provides a clear hierarchy of asset quality from speculative Inferred Resources to bankable Proved Ore Reserves. However, a JORC report is a starting point, not a guarantee of investment success. A company with fantastic reserves can still be ruined by poor management, political turmoil, or a collapse in commodity prices. The beauty of the JORC Code is that it takes much of the geological guesswork off the table, allowing you, the intelligent investor, to focus your analysis on these other critical business and financial risks. Note: Similar reporting standards exist in other major mining countries, most notably Canada's NI 43-101 and South Africa's SAMREC Code.